The year 2020 was a challenging year also for Macao, following the pandemic that broke at the beginning of last year. And these challenges will certainly be there in 2021 too.

The world economy will continue to face difficulties. And the financial system will not be an exception. Banking had to adapt very quickly to an unprecedented global scenario. Many of the consequences of the current situation have not been fully identified yet and uncertainty prevails. Despite the distribution of vaccines and the start of the population’s vaccination process, we have to keep a close watch and be ready to adjust our practices and policies to the new circumstances and the reality imposed by this situation.

But crises are also opportunities to promote change. Some of which will certainly become permanent. In the past few decades, technology has advanced very rapidly. However, the pace of its implementation has not always kept up with these advances. The pandemic did accelerate digitalization, with lasting changes in the organization of Banks and the behaviour of consumers.

With greater digitization of the economy, financial institutions face a new set of challenges, namely:

1. Transformation of the business to get the most from mobile and digital financial solutions;
2. Digital security management;
3. Compliance with regulations;
4. Leveraging technology to ensure competitive advantages;
5. Use of technology to improve the overall performance of the banks’ branches and the services provided.

Macao faces an additional challenge. Given that a very important part of the economy still relies on gambling, diversification thus becomes essential, now more than ever. To withstand future crises, the territory has to take advantage of the impulse created by the pandemic thus granting more dynamism to its business sector. And take the necessary steps to create the right conditions that will allow it to take advantage of the major opportunities offered by a wider market in the Greater Bay Area (GBA). This area aggregates 9 cities in nearby China, Hong Kong and Macao, with an area of around 50,000Km2 (half of Portugal), but with a population of 70 million inhabitants (7X Portugal) and with a GDP of around USD 1.4 trillion (7X Portugal), estimated to reach USD 4.3 trillion in 10 years!

For these opportunities to materialize in concrete projects, the current barriers to trade and investment must be progressively removed. One of the main obstacles to overcome pertains to the existence of three different legal, regulatory, tax systems and three different currencies, which limits the mobility of goods, capital, people, technology and information. Also, tight foreign exchange rules and controls hamper cross-border capital flows within the Greater Bay.

To overcome these obstacles and promote deeper and far-reaching cooperation within the GBA, authorities should further strengthen collaboration with financial institutions to standardize legislation and regulatory structures to increase the efficiency of services, reduce bureaucracy and lower cross-border business costs.

Furthermore, it will also be important to further encourage the digitization of the banking sector and harmonize products and services in the GBA. It is also vital to facilitate the flow of qualified human resources and to attract and retain experts from different areas in the financial sector.

In this context, Macao will be able to take full advantage of its unique characteristics. The territory is in a privileged position to become an important cross-border business hub, attracting Western companies to invest in China and Chinese companies to invest abroad, namely in Portuguese-speaking Countries (PLP), through the establishment of joint ventures and partnerships with local entrepreneurs. The recent Investment Agreements signed by China with the European Union and the countries of Southeast Asia (also joined by Australia, New Zealand and South Korea), will further strengthen Macao’s position as a natural springboard between the East and the West.

In addition to the privileged situation of Macao, there is the fact that this expansion can be leveraged through the Hengqin Free Trade Area, an adjacent island three times the size of the Macao area. The Macao Special Administrative Region has a direct link to other GBA cities through Hengqin, and several measures are already in place to facilitate trade and investment between Mainland China and Macao. These measures include tax benefits, for individuals and companies, exemption from value-added tax and/or consumption tax for deals in companies located in the Hengqin Free Trade Area, simplification of business registration, as well as, streamlining customs procedures and cross border movements. Further measures are due to be implemented to attract more investment.

Despite the more optimistic growth forecasts for 2021, there is still a long way to go before we return to the growth levels of the pre-pandemic past. In the meantime, we will continue to help the community and support companies and individuals to face these difficult times, creating the necessary conditions for a quick recovery. 

PS. I would also like to highlight the following!